Efforts to overcome rapid uptake of liposomes by cells of the mononuclear phagocytic system (MPS) have identified that lipids derivatized with the hydrophilic polymer poly(ethylene glycol) (PEG) have many advantages. The structure-function relationship of PEG-derivatized phosphatidylethanolamine (PEG-PE) has been examined by studies of blood lifetime and tissue distribution in both mice and rats. Liposomes composed of phosphatidylcholine (PC), cholesterol, and 7.5 mol% of PEG-PE show prolonged circulation and reduced MPS uptake when the PEG has a molecular weight in the range of 1000 to 5000. Up to 35% of the injected dose remains in the blood and less than 10% is taken up by the MPS (liver plus spleen) after 24 h in the best cases as compared to 1% and 40%, respectively, for liposomes without PEG-PE. Prolonged circulation with PEG-PE is independent of cholesterol, degree of saturation in either the PC or the PE lipid anchor, lipid dose, or addition of other negatively charged lipids, phosphatidylglycerol or cholesterol sulfate. This versatility in lipid composition and dose without alteration of blood lifetime or tissue distribution is essential for controlling drug dosage and release properties in a liposome-based therapeutic agent.